How to Pay Collection Debt
STEP ONEGet your free annual credit reports from all three major credit bureaus from the Annual Credit Report Request Service. Don’t be tempted by the cheap knock-offs you see online—the reports from this service will provide the most detailed information.
- On-line: go to www.annualcreditreport.com
- By phone: call 877-322-8228
STEP TWOGather the bills and collection notices you threw into a box or paper bag. Compare them to the reported collections on your credit reports. I find making a chart or spreadsheet helps to organize the pile. Leave space to put notes from phone conversations or action taken. Note: if the debt is a number of years old, know the statute of limitations in your state by contacting your State Attorney General’s office. Understand your consumer rights! Read Time-Barred Debts, available from the Federal Trade Commission by calling 877-382-4357, or click HERE to read online .
STEP THREECall the most recent collector (debts change hands frequently and you want to be sure to send payment to the right place!) Take detailed notes of the call and make sure to these questions:
- Ask if they still have the debt.
- If yes, what is the current balance? Request a written statement if you do not have one from the collector. For some unknown reason, many collectors refuse to send them out, so be prepared to insist or threaten to file a complaint with your state’s Attorney General’s office.
- Ask if they will delete the account completely from your credit report if you pay in full. Request their agreement in writing.
- Where do you send payment? (Avoid giving out your bank account information. Be firm about mailing the payment.)
- If they do not have the debt, ask if they know where it is.
STEP FOURAlways send the payment by certified mail with a request for a receipt of payment. What if a collection debt is too large to pay off with a single payment? You have two options:
- Set up a payment plan.
- First, review your budget to determine an affordable payment. We can help! Start counseling now.
- Send a letter to the address on the most recent notice by certified mail with your payment plan.
Sample letter: Date
Creditor / Debt Collector Company Name Creditor / Debt Collector Company Address
Dear Creditor / Debt Collector:
I am writing to you about my account #__________on which I owe $_______. I intend to pay the whole debt but cannot pay it all at this time. I can pay $________ each month and enclosed a check for this amount. You may contact me at the address below. Thank you for your understanding.
Your Name and Address and Account Number
TIPS TO REMEMBER
- Keep copies of all letters and payments.
- Continue to open your mail to know if the debt has changed hands or if you are being sued or threatened with garnishment. Seek legal advice, and attend a court date with your payment evidence.
- Negotiate a settlement amount.